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Obama outlines tough regulatory crackdown on Wall Street banks

US President Barack Obama on Thursday outlined stringent measures aimed at restricting the size of the country’s biggest banks and barring them from undertaking high-risk dealings that he said contributed to the financial crisis.

Slamming leaders of the financial sector for sending what he termed an “army of industry lobbyists’’ to campaign against the planed US regulatory reforms, Obama warned that “if these folks want a fight, it’s a fight I am ready to have.”

The White House wants deposit-taking commercial lenders to be banned from engaging in proprietary trading, and said the administration will press for fresh curbs on the size and concentration of financial institutions.

The proposed rule will prohibit commercial lenders from owning, investing in or advising hedge funds or buyout firms, and mandate bank regulators to enforce the regulations.

Administration officials said they also plan to bring noninsured deposits and other assets under the ambit of a current 16-year-old cap on bank market share that bars any lender from having more than 10% of US insured deposits.

The White House is optimistic of the Senate Banking Committee taking up the measures as it proceeds with major regulatory reforms for the financial sector.

BlackRock boss Larry Fink said that while he appreciated aspects of Obama’s plan, he would like to see “a comprehensive proposal” on managing systemic risk while not hampering lending.

Richard Bove, a bank analyst at Rochdale Securities, warned that the “president’s bill will do more harm than good”, as it could be disastrous for the economy, hindering some banks’ ability to lend as much as they have done in the past and also placing them at a competitive disadvantage vis-à-vis bigger, more diversified foreign banks.

George Osborne, the UK shadow chancellor, on Thursday said that the Conservatives, if elected, would likely introduce trading curbs along the lines of Obama’s proposals for City-based banks. The US crackdown on Wall Street was “definitely something we think needs to be done”, Osborne added.

The UK government said it would look “very closely” at the US plan, but would not automatically impose the same.

The proposals marked a victory of sorts for Paul A. Volcker, the former Federal Reserve chairman and external adviser to Obama, who has been increasingly vocal about the need for the administration to crack down on what he proclaimed as the “casinolike” operations at the big banks.